Local real estate market strong in 2012 – outlook optimistic for 2013

by Billy McNair on March 19, 2013

All the numbers are in, and they show that 2012 was a year of gains both in the national economy and in our local housing market. Real estate values in 2012 recouped losses sustained in 2009 and 2010 and in most cases, surpassed the previous highs of 2007 and early 2008.

As shown in the tables, Menlo Park benefited from a double-digit increase in median sales prices while Atherton decreased 3%. Nearby, Portola Valley had 20% increase, Woodside a 2% decline.

Appreciation in our local market over the past year has been driven by a number of factors including:

  • Extremely low housing inventory levels
  • Historically low interest rates promptinbuyers to purchase
  • Pent-up demand resulting from the previous
  • 4 years in which many buyers sat on the sidelines waiting for more professional stability or improvement in the economy
  • Influx of foreign buyers who view our local real estate market as an attractive investment opportunity
  • Job and overall economic growth in our local market. Companies are hiring and employees’ stock holdings are appreciating, creating liquid assets to be invested in the purchase of a new home

I expect that the appreciation we witnessed in 2012 will continue in 2013. I anticipate that we will see very low inventory levels as demand is outpacing supply.

There are several factors that could potentially slow the appreciation and growth (although I think the risk of these is fairly low):

  • If many sellers in an effort to capitalize on demand decided to put their home on the market and we all of the sudden had a high influx of inventory that brought they supply/demand in to balance, then the appreciation and growth could slow
  • If interest rates were to rise by considerable amounts, that could slow the demand/buyers and in turn appreciation/growth
  • Naturally if the local economy or tech bellwether companies (like Google, Apple, Facebook, etc.) had stock prices fall dramatically that could slow the market.  Our real estate market follows in lockstep in most instances the stock market so when it rises, the housing market rises and vice versa.  Given the market set all time highs earlier this week, it’s not surprising that our real estate market is also very hot.

Bottom line: Many analysts and media outlets are predicting appreciation of 10-12% in 2013. I concur with these assessments.

Atherton real estate chart

Contributor Billy McNair, who grew up on the Peninsula, started the McNair Group in 2008.

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